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tv   The Exchange  CNBC  September 30, 2019 1:00pm-2:00pm EDT

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the coming year, i think to stae >> marathon petroleum. this is more about what is going on with elliott and the decisions being made because of that, i think the stock goes higher. they've been right if this last guy is right, this thing is going that's it for us "the exchange" starts now. >> thank you, hi everybody china fires back on trade saying it will increase foreign access to its market. could this be the first real win for america or just a hallow gesture? we'll ask. more conflicting data on the economy. leaving averages roughly unchanged. which way will markets break in the final quarter? >> the falt from not so forever 21
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and is california picking a constitutional fight with the ncaa >> the setup is green across the screen it might be a little more flattish for the quarter overall. half a percent gain for the dow. similar for the s&p and the nasdaq up almost a full percent as well. just below the 3,000 level on the s&p 500. we'll keep an eye on that move for the s&p. as things set up for the month, in september what could have been a rough month, the s&p 500 is roughly 2% financials have a really deent break out more than doubling in the health care sector is flat we'll end with a look at one sector, that is utility stocks up just a quarter percent today. since this move here, this is up
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26%. we will put a star here because that will be on pace for a record high close today if these s&p utilities hold these gains into the closing bell. >> six straight closing quarters welcome to the exchange. senate leader telling cnbc if the house advances impeachment proceedings, he'll have no choice saying any u.s. president could get the chinese to buy food from us china doing more than just buying agriculture saying they'll increase foreign access the u.s. might block investment flow into china. let's get more on this announcement from china with john rutledge.
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and welcome to you both now. china increasing access to its markets. you think this is a real deal? >> absolutely. it is something on the table as early as last february it is not against chinese interest when you see them do something like this, it's very likely because they are trying to counter capital out flows which weaken the rnb they are very afraid of those. allowing foreign assets in, helps support the flow >> what does this look like in practice >> i think it is helpful to see companies like pay pal get into the chinese payments market. we've been waiting years and years for this development i agree with john that it is a good change and in the chinese interest the reality is, the chinese have
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waited far too long. in the meantime, we give the chinese access to our financial markets but it is not resip rry indicated by them. >> come on, that's not sustainable. that has to go away. >> to your point, how they dragged their feet on access, does that mean they flip the switch on tomorrow will they find that this continues to drag out? >> it is a positive sign but anyone who does trade policy will tell you the chinese have bought the same things five or six times. trust by verify. a lot of other data shows they do need to open for their own reasons. whether structural flowing their fear of excess reliance on credit and other forms of stimulus or just popular discontent and the need to get
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better relations with the u.s. going into their week long celebration for the national day. >> john, do you credit the u.s. strategy for china forgetting this win finally on them opening up the markets is that rhetoric working even if the administration, if navarro denies they are looking into it? >> to some extent that could be true but they said open the market to foreign investment, not american investment. china is in the middle of rebalancing their entire portfolio from the u.s. and towards other places this opens the door for other investors. the talks this weekend about delisting companies and restricting flows are really dumb they drive capital out
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they lower the rnb and raise u.s. prices in china and raise chinese prices in the u.s. and make the trade deficit worse get your mouth closed and get a trail deal done. >> i want to ask both of you james, you mentioned popular discontent which could be part of why they are making these moves. here is a tweet from the chinese editorwe all follow close cannily for news he talks about the hong kong protesters planning serious violence for october 1 including killing police officers and recruiting suicide bombers what does this mean for them as things continue? >> they are intending to crack down hard and also worrying about these protesters
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we are across the negotiating table with people that attacked the united states with the same rhetoric displayed by iran to us with irrational sentiment. it is necessary to have total transparency on both sides and not one side only. >> are you concerned about what plays out here in the days ahead? >> we have no supporters in taiwan which is another interest of china it is important to realize that china has neocons too. they are called the shanghai gang they are really the hard liners in this story. it is not possible for the chinese government to back down in hong kong it would open up all sorts of other troubles for them. i think they are trying rhetoric as much as they can. i don't see the kids backing down either. i have been worried about this still am
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>> we'll see if it comes to a head >> really appreciate it today. thank you so much. >> thank you >> moving on, the ipo market has showed some cracks now goldman is reporting their troubles may get worse from here companies with multiple shares like lyft and pintrest aren't eligible for the usual average welcome to our guest i know you follow the ipo space quite closely. these are a big problem for them, isn't it >> yes it really gets into the fact that if you have multi-share class a and b, you might not be included into the index. what you are giving up according
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to that report is access to $3.3 billion to access a bid >> if you are not in the s&p, every day, we have a new stat about that if you are these companies especially those that have stumbled out of the gate, does that put an ownness on you out of the gate? >> yes not even that process of being restricted from getting access to these, what we've seen recently on those valuations the dispute around having extra share classes. every ceo will take a hard look. they know what they are getting themselves into and giving up those voting rights. you are now under a regular lated industry you should know by now what you
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are about to get into? >> the peloton ceo was asked about this he said, i have diluted my state to such a point. he saids that why i want this 20-1 structure about a quarter of the time people will ask me about this. is it should we let the founders maintain some is control of these companies? they are the ones who put their necks on the line here how else do you bridge that gap and make sure those companies are in the s&p and those companies are rewarding? >> when you are a vc incubated company like peloton with eight rounds of investing. you can exit not just by ipo but through acquisition as well. looking a looking up ring ceo.
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that company culture and tha ceo is still at the helm driving that business into its mission >> that is probably the exception to the rule most people believe which i'm setting myself up to be the next instagram or whatsapp. they go in and then their sidelined as the new parent executed on their vision i don't know if that is feasible for most companies to get the ring-like outcome here >> if you follow through on your thesis, your vision and business plan, you should follow through in your company. >> when wework relist and it sounds like that is their new plan in 2020, what should that look like? given whoever is the ceo at that
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point? should they go one for one the whole way? to reflect on that report, do you go back to one share equals one vote or not? it is still going to be determined i'm not going to talk too specific on that because of the expose you're there. any ceo does seriously need to consider those voting rights and talking very large vanilla companies. they look at those voting rights for the flow of the ownership. they may be limited to the amount of capital they can bring. all things on the table. all things considered going into 2020 >> we'll see if it helps it would be a good thing for everybody. appreciate it. still ahead on "the exchange." >> coming up, trade, the consumer, a divided fed and
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conflicting conflicting e con data what narrative will play out in the fourth quarter and why wall street's middleman macing and it turns out forever doesn't always mean forever. this is "the exchange" on cnbc
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>> welcome back to "the exchange" modest gains those swings driven by competing narratives the u.s./china trade deal is on, no they're not which narrative will win out for q 4? let's bring in paul hicky. chief market strategist. good to see you both let's start with you the fourth quarter last year broke in favor of the bears. how do you see it this time? >> completely different. we believed they were going to raise rates three times. we were looking at a global economic slow down which was persistent but not increasing. we had the u.s. economy slowing down but stabilizing it is completely different
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fourth quarter >> maybe, paul, the way to say it is that last time around, we had reached the peek optimism and then everything pointed to the down side. driving the averages down. now, are we starting off with a little pessimistic thinking here >> i couldn't have said it better than art there. two completely different back drops for the fourth quarter last year versus this year tighter fed versus loosening fed. when we look at the landscape, we are starting with a more restrained out look. we have this awful fourth quarter last year. we saw this weakness there are concerns heading for a repeat of the fourth quarter when we look at the overall issues both positive and negative
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we see more positives than negative we think the red may not be gold medal-type returns but silver to say the least. >> both of you have things you watch to figure out what is happening with financial conditions what screams to you and says, okay, things still look okay out there versus those who say the slow down is underway. >> the trend isn't inverted any longer there is no distress in the market, it's most important. reflecting higher is housing we saw new hold sales and existing home sales, that is such an important industry virtually since the first time since the crisis, housing is so important in and of itself we've been waiting for a long
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time for starts. thankfully it is turning the corner >> you are saying don't lean against this when you have something like housing turning up do you think that was a temporary thing? you have the 10-year going below 1.5% in august >> it was more about affordability in terms of rates. home builders finally got it two populations that want the same house the first-time buyer and the boomers that want to down size there wasn't enough of that product. that product is increasing affordability is there >> paul, when we look towards the fourth quarter, i don't know if technicals is the right term but positioning. utilities are up six quarters in a row. that hasn't happened in 25
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years. at to you shouts extreme one way or the other >> you look at the utilities doing so well. it shows you where the overall stance of investors is we are not changing these high flying ipos. there is a more strained attitude on the part of investors here the s&p 500 hit a new high in the last couple of weeks that let us out of every other correction we've seen. we have no reason to believe that won't happen again. the s&p long-term moving average is rising. the economy is stabilizing we saw the economy show signs of weakness it is not necessarily rolling over that type of activity the big worry is uncertainty on the market that could effect a number of things this could be really bad
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companies could be citing uncertainty with their calls the pace of earnings warnings is right in line with the historical average >> we've seen no meaningful uptick over the last 10 years. this goes to show we may see positive surprises there analysts sentiment has been very weak >> that is all helpful thank you so much. if you are wrong, with we'll check it out 5e7end of the quarr coming up, from those disappointing ipos, banks have been feeling the pressure. how do you stay positive in this environment? plus the 737 max, new safe guards a new article shed light about
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why that was not part of the 737 max. that's ahead woman: my reputation was trashed online.
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>> welcome back. take a look at shares of thor industries there is more to the story let's bring in frank holland interesting, you flagged before this report the fact that
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winnebego had done so much more than thor and now look at thor today making a big difference. >> this could be a sign of careful optimism thor had an earnings beat today but largely due to the european company. the u.s., still down the u.s. is dealing with very difficult comps from a report 2017 >> you are telling me, european rv sales are a bright spot from everything we read about the european economy, i wouldn't expect that. >> over there, they call them caravans they are planning on bringing a lot of that tech from europe cot u.s. to give a boost to the u.s. >> they are called caravans and
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are more profitable? is this a case where the analyst was caught a little off guard, it is a one-day move and they have a lot to prove door you think this changes the narrative? >> short answer is prices are declining, it will still be one of the top five sales. looking at it in the consumer discretionary ee con aconomy, i still strong >> we appreciate that. to sue herrera for an update >> former national security advisor john bolton gave a pessimistic out look on korea to give up their nuclear weapons. this is the first public appearance since he was ousted from his post by trump
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they have not made a strategic decision to give up its nuclear weapons. in fact, i think the contrary is true i think the strategic decision kim is operating through is he will do whatever he can to keep the deliverable capability a utah highway patrol trooper escaped serious injury after a pick up slammed into a car as he was working on a i crash scene. the nfl suspending a linebacker for the rest of the season for ahelmet-to-helmet hit. he was ejected from the game they added that his extensive history of rule violations factored into that decision. he can appeal that ruling. that is the news update at this
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hour back to you. >> here is what's coming up on "the exchange. >> ahead, the tech giant that jp morgan says it could rally up to 20%. >> when forever isn't forever. >> and california wants to pay student athletes >> the computing trend that could have big implications for our economy. that's all ahead no, we still have bills. aflac gives you money directly to help with those. aflac! and your deductibles, knee brace, whatever you choose. aflac sounds like a winner. umhum... umhum... we try. get help with expenses health insurance doesn't cover. get to knous at... duck: aflac! dot com
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>> welcome back. let's catch you up on a few stories. it is time for rapid fire. here with more headlines are our guests welcome. let's talk about what a slow go it has been for investors waiting for a big tech break out. faang is so 2018 netflix's is still off apple off 12%. still hasn't been able to get back to those new highs. one firm is betting big on tech. jp morgan with a 20% rally they are saying better than expected iphone sales and 5g will be a catalyst
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>> we go through this every year with the apple iphone cycle. they underestimate how many they'll sell, they've cut back on this or that. and then, they come out with a decent number. >> kind of like earnings season but for the current one, they mark it doubt and mark it down >> apple's priorities are changing more to services, so yes, we are entering a new phase here it is the same thing >> that goes to the profit center >> 5g could be apple's big success in china where iphone sales are slowing but they are the only foreign company with a top position in china market samsung already has a 5g phone on the market. getting that iphone with 5g capabilities out sooner than
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later will be key. >> people are waiting here in the u.s. for a full roll out >> i've heard people say, i will wait until 5g is in place. others don't really understand what it is >> a little duct tape on their iphone >> you can see why also that camera is beautiful. >> if anything, the real story is they should be off to a good start. story of the day, weekend, whatever you want to call it forever 21 is officially filing for bankruptcy and will close up to 50 stores worldwide the strategy of having bigger stores not panning out joining the list of retail bankruptcies including payless shoes and more >> one of the things that would bring them down is massive, massive stores a few in new york city are about
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four-stories high. in the malls, they have these huge, huge stores. the quality was never great. i spent a lot of my dairy queen money in high school there you can order things of not great quality on amazon. >> if the 16-year-olds are not shopping there these days, where are they going >> amazon, ebay. they didn't get into the digital community fast enough. >> you have a lot of retailers that don't have a big on line present and they are doubling down >> i hear people saying, fashion is bad for the environment the reformation and the real real >> these are like $5 to $20
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price point. there are a lot of consignment stores in town >> also rent the runway. there is so much demand they can't keep it up with it >> that is also a fascinating one in terms of startups for the mall operators they are leaving a big hole to fill >> a new study finds the fastest growing commute is no commute at all. working from home has taken over public transportation as the third most popular commute three quarters of people still drive solo >> they can do it in radio but we can't do it >> hallow grams. >> my son works in technology industry he works from home one or two days a week.
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multiply that and you get a i whole bunch of people that don't go to work. >> what happens to all those desks. i heard it may be an issue for land loerrds and weworks of the future and compensating for the fact that only four or five people may be in the office >> that is an added benefit. i think there is a big appeal. i have many friends that do that they love it >> my dad used to do summer fridays for us growing up. i agree, there are the younger workers. anyone who doesn't have to go into the office. it is a perk >> no, no. we love going into the office. >> this is it. we are not doing this from home. >> you remember when coming into yahoo and clamping down on the work from home thing one of the questions they've
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asked and seen this rise sharply is in utah they are going to roll it out more widely after finding that productivity rose more than 20%. >> people are likely to work fromhome in utah, colorado, oregon i can say a lot of these states where they have a beautiful back drop and scenery a lot of people want to spend more time outside of the office. they are more inclined to take that hike whens it is 10 minut away versus two hours. >> i want to hear more >> i'm on an environmental kick. environmentally. >> i only say 25% of the things
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come to my mind. it is called job security. >> california's governor today signed into law that fair pay to play receiving support from athletes like lebron james and draymond green. noting that this legislation may violate the commerce clause. the organization will be rendered impotent and irrelevant >> it violates the constitution because it says the u.s. congress can only enact laws that have to do with commerce. all of these play sport out of state which makes it interstate commerce a lot will happen before 2021
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when this is enacted by the way, why did it fall to the california legislature to enact a law like this? what do they get out of it hoping there will be no change before that 2023 so it puts the spotlight on ncaa to respond california saying, hey, we have four of the teams in the pack 12, we are hoping that being a big driver of rating, they'll be able to drive change here. >> what you are forcing the universities to do, you decide you follow the law or follow the ncaa rules you can't do both. it's going to change >> i think they had a point saying every student can market off their name ople a profiting off these athletes why not let them do the same they have a good point here. >> even if the ncaa goes in this
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direction. if you want to talk about title 9 that was meant for gender par di all of the money will go to the male football and basketball starz. >> what about female gymnasts and female tennis players. >> they'll do okay but it is a long time from now maybe they'll have cbc to help them cbc products and athleisure wear an online product that is offering a line of cbd infused clothing of prices like a $200 sports bra
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the only way they can distinct wish themselves is to infus cbd into their clothing. $180 and you can wear them 40 times and they'll work really well. >> do you wash them? >> apparently you do but these claims are so unverified >> where is the fda in all of this >> i think the fda said, if you think it works. >> i think they are a little distracted by vaping they have this huge national crisis to deal with. and it will be left for kate using it for her doing baths. >> we do use cbd, it calms them down it works, for us >> from jp morgan's ipo woes, big banks are feeling pressure after inbeg september's best
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performing sector. will the rally be derailed that's next.
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>> welcome back. a weave of disappointing ipos putting pressure on the banks. the sector has already been underpressure. recent attempts from the likes of goldman sach looking at banking. let's bring in jeff hart, and cnbc commentator mike santolli the efforts of consumer banking show they already lost on the effort it is not clear if it's baring out just yet >> it is not clearly, a lot of the edge it has had in the past, franchises
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and institutional trading had been dulled by regulation, technology and all of these things we know have been going on a long time i do think goldman and other firms say we were worsed to become a bank holding company and be a leading engine but that doesn't necessarily mean it is going to be nearly as profit in terms of what their old businesses were. >> what is your rating on goldman, how do you view those prospects? >> the article today was pretty negative it did point out that profitability was great. i think you've got to take a step back to understand that goldman is building. that's the way it goes you are going to have losses we are looking at the consumer business having a 60 basis point
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drag i think it is pretty manageable in the greater scheme of things. >> to that point, it raised for me a lot of questions about whether the wall street business model is fundamentally broken or not. is it just going to be the wall street is smaller but still profitable in the future for example, morgan stanley. how would you rank them? would you say there is still a place for them the returns on equity still look good or no >> yes there is definitely still a place for them not like it s. if you look back precrisis, you probably had a 13, 14% average on these at good times, they'd be 30 and bad times just break even.
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there is definitely still rule the big key is a focus on the capital markets. those markets globally grow at the global gdp it will not be part of the go go days we saw years ago. >> mike, what would you add to that >> i do agree. looking at the way these companies are valued they don't imply that. maybe the market has figured this out i don't want to generalize too much the way that ipo market has taken a slide. not because these public investors want to pay out. look at how they traded from day one. the underriders thought they had the demand on them what does it say about their
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role as mediators? you could miss fire on that transaction. i wonder if the markets are too quantity tative or systematic. >> jeff, i'll give you the last sort of rebuttal on that >> it isimportant not to turn the next volatility into the next big down turn i think still things look pretty healthy as far as they look healthy going forward. there is a lot of good things going on there i'm cautious to say that those head winds are growing some very company specific issues i don't know i'd go so far to say the ipo market is turning the wrong way. i think we are hitting a pause here it is an ebb and flow.
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we have a hold on morgan stanley. >> why is that >> it has become more reflective of the bismarck et i see the upside i think the street is closer to what they can earn with respect to goldman >> i appreciate it smaller vendors can do big business on amazon but many have been afraid to speak out publicly for fear of being suspended. as investigations into big tech have started, we are hearing from one big seller next great. thank you. thank you, sir. lunch next week? terrific. say hi to the team. will do. call my office, i will. -sounds good. alrighty.
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as federal regulators launch investigations into big tech they are reaching out to little guys to understand the way big guys are abusing our using their power. >> by appear ing in this interview we could get in lot of trouble. sgr he >> he's been selling toys for ten years. stuffed animals. a construction toy, even kick
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boards where does he sell all of this in. >> amazon by f in 2018, 98% of our revenue came from amazon. >> reporter: in a post, he argued that gives amazon enormous power over his business and ultimately harms consumers >> if we're caught selling our products for less on walmart.com than we sell them on amazon then amazon will suppress our listings in amazon search which tremendously hurts sales what do we do? we end up raising prices on our other marketplaces to match amazon >> reporter: that caught the attention. an investor reached out and heart spent an hour on the phone with him >> it's hard to find someone who is willing to speak up about an issue when it comes to amazon. people are afraid to speak publicly. >> reporter: regulators appear to be casting a wide net a source tells us the justice
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department sent a subpoena to duck duck go a search engine trying to compete with google. >> it can't just be sort of one squeaky wheel raising the issue. it has to be lots of players talking about the issue. >> reporter: for heart, raising his concern publicly means he could wind up suspended from amazon because it violates his contract >> going into christmas we're going to hit over a million dollars or get close to it in inventory. what happens to the business if we can't sell in november and december we're a toy seller what do we do with that inventory. it's going be really long haul from that point on if we were to get in trouble >> my first thought is, is undercutting amazon on price the
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only area of his disagreement with the platform? is amazon allowed to set the rules and say we're not going to let you go somewhere and charge your products cheaper. >> i think that's one of the biggest issues he has and one of the reasons he's bringing that one up is because he says this raises prices for consumers. so much of the anti-trust debate has been around the question of these are free platforms these are free services that consumers using, how do you create an anti-trust argument. this is causing h e ining him te prices >> he's sticking his neck out at an important time of year. thank you. boeing left out key safety features it used to previous models that's according to a wall street journal report. we'll have the details, next
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boeing ceo announcing the company is taking immediate action to ensure the sacfety of boeing's products. the max model has been in place in early year planes phil >> the safety guards that boeing
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announced today, the ceo taking the recommends daations from th board of directors announced last week. saying we need to do a better job when it comes to safety. with regard to the wall street journal report that did not trigger dennis reaction today but he will be questioned by congressional members when he goes to capitol hill next month. it's also going to be about why were there some redundancies regarding the flight control software on military versions after the 737 max that were not there for the commercial version. the fourth quarter is what it's all about. this is the quarter when boeing not only had get the plane recertified. it had to get it signed off on not only faa but other regulators around the world and then get it back in service. that's the goal. they have 90 days to do all that they say they will make it you have well over 500 planes, more than 350 with airlines and
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you have these others that have been built more than 500 all together as you look at shares of boeing, it's hovering in that 378 to 380 range. it's all about can they execute now in fourth quter. >> thanks very much that does it for the exchange. power lunch starts right now it most certainly does thank you. we'll see you over here in a moment welcome, everybody here is what's new at 2:00 for you on "power lunch. the d.c. drama heating up. president trump fighting back as the house impeachment rolls on for now wall street does not seem too concerned forever 21 filing for bankruptcy one group of stocks struggling despite thestrength of the american consumer. we'll explain as "power lunch"

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